Vita Life Sciences (ASX:VLS) Has Announced A Dividend Of A$0.035

Vita Life Sciences Limited (ASX:VLS) has announced that it will pay a dividend of A$0.035 per share on the 4th of October. This will take the dividend yield to an attractive 3.9%, providing a nice boost to shareholder returns.

See our latest analysis for Vita Life Sciences

Vita Life Sciences' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Vita Life Sciences' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

If the trend of the last few years continues, EPS will grow by 43.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

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Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was A$0.04 in 2014, and the most recent fiscal year payment was A$0.09. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Vita Life Sciences has impressed us by growing EPS at 43% per year over the past five years. Vita Life Sciences is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Vita Life Sciences Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Vita Life Sciences is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for Vita Life Sciences that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.